WINTER FINISHING THE HIGHEST COST SYSTEM OF FARMING –
ICSA Beef chair Edmund Graham has called on the meat industry to begin negotiations with their customers that will deliver at least €7.50/kg for beef for winter finishing systems. “ICSA is putting retailers and processors on notice that the escalation of costs means that anything less will be a complete loss-making venture, on the assumption that ration is around €500/ton.”
“ICSA has been analysing figures for winter finishing and the results are a big wake up call. We see dairy farmers getting well in excess of 50c/l for low-cost summer milk. It now needs to be acknowledged that winter finishing is by far and away the highest cost system of farming, and it is also the highest risk. The beef industry cannot expect to continue its current model and expect farmers to take all the risk. That is why ICSA is now calling on beef processors to make plans for guaranteeing minimum prices for winter finishing, which should be linked to cattle ration price.”
“In our view, that price is €7.50/kg on the assumption that ration is €500/ton and if ration goes higher there should be additional increments on the beef price. The reality is that store prices are substantially higher than last year and rising on a weekly basis. Store producers also need higher prices to cope with escalating costs but this all feeds into the economics of winter finishing.”
“These figures are based on examining Teagasc models but also take into account factors that Teagasc are not facing up to. For example, on the variable costs, Teagasc figures are not realistic in terms of accounting for mortality. We have included a calculation based on 1% mortality. Teagasc figures also tend to over-estimate kill-out percentage and weight gain, particularly in the context of decreasing beef merit in the dairy herd. The Teagasc figures also assume top-class silage and tend to ignore weight loss at purchase and at housing and assume no setbacks. This is not realistic in real farm situations.”
“Then there is the elephant in the room regarding fixed costs. Traditionally, some models used to assume that subsidies covered fixed costs and some variable costs. But that doesn’t take into account the fact that most winter finishers traditionally had high payments per hectare because their system was built around high slaughter premium and special beef premium payments. These payments have been decimated in recent years and will be further reduced in the coming CAP. So, the assumptions around the role of subsidies are now hopelessly inaccurate. We are now in a model where subsidies can only be regarded as a compensation for environmental public goods.”
“On the other hand, fixed costs are escalating. While much of the commentary has rightly zoned in on a trebling of fertiliser and a doubling of feed and fuel costs, we also need to take account of how everything else is rocketing in price. This is having an enormous impact on fixed costs. While it may not seem much, the price of a wheel for a wheelbarrow has trebled. But this is just a simple example of huge escalation in all hardware costs – from fencing to steel to timber. Simple repairs to fences, sheds and yards are all costing thousands rather than hundreds. All of this must be factored into decisions on whether to feed cattle or not. It is also nonsensical if we don’t allow that a winter finisher needs to factor in labour costs – nobody should be expected to work for free anymore.”
“The dairy sector has seen serious increases in milk price but has also seen other supportive measures from milk processors. It is now time for the beef processing sector to step up to the plate, and ICSA believes that a starting point must be a guarantee of a viable price for winter finishers with flexibility to rise it if cattle ration price goes above €500/ton. We believe that at a minimum that price will be €7.50/kg.”
ENDS
